Good afternoon, and welcome to Peraso Inc.'s Third Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, November 12, 2024. I would now like to turn the call over to your host for today's conference call, Mr. Jim Sullivan. Please go ahead.

Good afternoon, and thank you for joining today's conference call to discuss Peraso's third quarter 2024 financial results. I'm Jim Sullivan, CFO of Peraso and joining me today is Ron Glibbery, our CEO. Today, after the market closed, we issued a press release and related Form 8-K, which was filed with the SEC. The press release and Form 8-K are available on Peraso's website at www.perasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today's call that may be accessed through the webcast link on the Investor Relations website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward looking. Peraso advises caution in reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows or other financial items, including anticipated cost savings, also, any statements concerning the expected development, performance and market share or competitive performance of our products or technologies. All forward-looking statements are based on information available to Peraso on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Peraso's actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about these risk factors and additional risk factors are set forth in Peraso's public filings with the SEC. Peraso expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. With respect to remarks on today's call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, severance costs and the change in fair value of warrant liabilities. These non-GAAP financial measures, definitions and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related Form 8-K, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available on the Investor Relations page of our website. Now, I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?

Thank you, Jim. Good afternoon, and welcome to everyone on the phone and webcast. We appreciate you taking the time to join us today for our third quarter call. Revenue in the quarter was within a range of expectations, with overall results being highlighted by meaningful improvement in our operating performance. We began to see the benefit of our previous and ongoing actions to reduce costs and increase efficiencies, resulted in operating expenses decreasing almost 20% year-over-year. Although the broader macro environment and prolonged inventory adjustments remain ongoing challenges, we continue to make notable progress during the quarter to advance existing customer engagements, towards new design wins for our millimeter-wave solutions. Much of this recent activity has predominantly focused with our targeted markets of fixed wireless access and tactical military communications, which I will expand on in more detail as part of today's call. Turning to Slide 4, we continue to ship significant quantities of our end-of-life memory IC products. Third quarter shipments increased sequentially to approximately $3.7 million from $3.4 million in the second quarter. We ended the third quarter with a total remaining purchase order backlog of approximately $5.7 million. We remain on schedule to fulfill the total remaining backlog of memory IC orders by the end of the first quarter of 2025. As previously discussed, these shipments against remaining backlog will continue to contribute meaningful revenue and cash flow, as we work further to expand our millimeter-wave design, win pipeline and continue to support customer ramps of our millimeter-wave products. Next on Slide 5, we are continuing to cultivate a robust and growing pipeline of opportunities for our millimeter-wave solutions. As discussed on past earnings calls, our sales efforts and engagements have been focused on expanding market reach across diverse geographies and end market applications. These include…

Thank you, Ron. Turning to the results for the third quarter of 2024. Total net revenue was $3.8 million compared with $4.2 million for the prior quarter and $4.5 million for the third quarter of 2023. Product revenue from the sale of our memory integrated circuits and millimeter wave products in the third quarter was $3.8 million compared with $4.1 million in the prior quarter and $4.3 million in the third quarter of 2023. Royalty and other revenue for the third quarter of 2024 was $30,000 compared with $0.1 million in the prior quarter and compared with $0.2 million in the same quarter a year ago. GAAP gross margin decreased to 47% in the third quarter from 55.5% in the prior quarter and 45.4% in the year ago quarter. On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin for the third quarter was 61.7% compared with 68.8% in the prior quarter and compared with 58% in the third quarter of 2023. The sequential decrease in both GAAP and non-GAAP gross margin was primarily attributable to a $0.3 million write-down of millimeter wave inventory, as well as lower royalty and other revenue. GAAP operating expenses for the third quarter of 2024 were $4.5 million compared with $6.8 million in the prior quarter and $5.6 million in the third quarter of 2023. Non-GAAP operating expenses, which excludes stock-based compensation, amortization of intangible assets and severance costs, were $3.3 million in the third quarter compared with $4.9 million in the prior quarter and $4 million in the third quarter of 2023. The year-over-year decrease in third quarter operating expenses on a GAAP and non-GAAP basis was primarily attributable to a combination of previously implemented cost reductions and the company's ongoing cost containment initiatives. GAAP net loss for the third…

Thank you. The floor is now open for questions. [Operator Instructions] And the first question today is coming from David Williams from Benchmark. David, your line is live. Please go ahead. Q – David Williams: Hey, good afternoon, gentlemen and thanks for taking my questions. Maybe first, Ron, it sounds like you've got a lot of traction here and congratulations on the design wins that you've announced. When do you think we should start seeing maybe an inflection coming on the revenue side? Just trying to get a sense of when these design wins could turn into deployment and then eventually revenue?

Well, thanks, good question David and for listening in today. I appreciate that. So obviously, from our perspective, the sooner the better. We think -- we know for sure there's now backlog late Q4 and into Q1. So we think Q1 is realistically when it's really going to -- we're going to start to really see that inflection point. We -- as we said in my remarks, like we have worked through -- we're working through the inventory issues and so on, just kind of general macro issues. But I would continue to stress like from our perspective, the design win activity is very strong, and we're really -- we're more than optimistic that by Q1, we're going to start to see those shipments start to resume because we were starting to see that backlog. So that's kind of the thinking from our side. Q – David Williams: Okay. Perfect. Thanks so much for that color. It sounds like maybe that the inventory is largely at least getting worked through. Are you seeing that in your North America, maybe your largest customer from their inventory as well? Or is most of this maybe the positive more from outside of that largest customer.

I would say both. And just to kind of rewind a little bit, Dave, when we -- obviously, over the last few quarters, we were really caught by our customer concentration -- with a couple of customers. We've worked so hard over the last two years to really fix that problem. We've got 100 -- not really, I'd say, in the order of 100 customer engagements. It's actually, from my perspective, quite remarkable. So what we're going to start to see -- we are already start some green shoots in Q4 with existing customers and start to see the new customers come online in Q1. So it's really a combination of both, I would say. So -- and again, like starting to see that volume. But definitely -- I mean, one stat that I'll throw out that I think is quite remarkable that I was kind of updated after kind of recently is -- part of our design win process is what we call Eval kits [ph] where customers buy Eval kits -- kind of try things out testing. We sold 28 of those in the third quarter and -- or in the -- I'm sorry, the second quarter. No, it was actually the third quarter, and it was actually the most we ever sold in our history. So every single quarter, not only have we seen the design wins going up and the customer case has gone up. But people are actually really testing their stuff out early. So I'm really thrilled with, again, the traction we're seeing on that front, and we're really optimistic that by Q1, we're going to start to see those orders start to come in. Q – David Williams: Great. Yes, it's certainly good to see the traction there. I guess if you're thinking about kind of your WIP deployments and the lift care. How heavy a lift is it for these wins to deploy the fixed wireless access or -- and are you seeing it more from existing providers in the marketplace? Are these start-ups that are coming in that are looking to get involved in the fixed wireless access -- or is this just any color there on that customer and what those look like in terms of your design engagement.

Well, I would say somewhere above 95% of the list we deal with our experience. And I would beat the drum on the same problem, which is we solve the congestion problem on millimeter-wave [ph]. And so the problem with congestion is with existing 5 gig and even now 6 gig solutions is it can only support so much customer density in the marketplace, and we solve that problem. So these are experienced risks, who are actually ripping out their 5 gig systems because they just can't support the density. So I'm really trying to think if there's anybody new on the market, but I don't really -- I can't really think of it. I mean they're all very experienced WISP that really get the advantage we bring to the marketplace with millimeter-wave.

Yes, yes. And just one more, if I may. And do you think we'll see that kind of transition from the 5G over to 60 gig with the North American market? Just kind of given the success they've had there and the congestion issues are clearly going to be an issue at some point?

Absolutely. I think like the announcement in Los Angeles of a 60-gigahertz solution is really the bellwether there. And that absolutely solving the density problem in the urban market. And again, I would say -- so I think in North America, so the beauty of what we bring to the marketplace is what we refer to as fiber-like performance. So now even our customers are tidying up to 2 gigabit per second, which is exactly like fiber, and I think the point that I'd like to actually kind of expand on a little bit is this whole BEAD funding. And of course, the $42 billion of BEAD funding is really -- was really fiber oriented. And I really believe, and I mean, don't call me on this, but I really believe that with the change of administration, you're going to start to see a much more tech neutral stance from the administration because basically, as opposed to kind of trying to architect a fiber-only approach, you're going to start to see in North America, whatever solves the problem best approach. And of course, when we bring to the party, besides solving the congestion problem is the fact that we can reach into 1 or 2 gigabit speeds like fiber. So that's -- those are two real benefits that we bring to this marketplace, especially in North America.

Great. Thanks so much for the help and best of luck to you in the fourth quarter.

Thanks, Dave.

Thank you. Your next question is coming from Jon Hickman from Ladenburg Thalmann. Jon, your line is live. Please go ahead.

Hi. Hey, just two questions.

Hi, Jon. Thank you.

One, is any – is BEAD money being spent right now on the fiber side? Or is it like in permitting stage and stuff like that?

I think it's still early, would be my assessment. I mean the BEAD process is reasonably onerous. It takes matching funds. I think the application process is quite onerous. So I think the funds are starting to trickle out but it's probably more of a longer-term process in 2025 and 2026 Obviously, from our perspective -- sorry, the only thing I wanted to say is from our perspective, the only -- I mean, the change we're really hoping to see is to go from a really a very fiber-centric approach to a tech-neutral approach that includes our technology.

So are you seeing anybody -- any of the risk like starting to like ask for them money?

Well, I mean, we were at a WISP, so called Wispapalooza about a month ago in Las Vegas. And definitely, people are circling around. I don't recall anyone saying to us specifically, they've applied. But I think they are in the background starting to apply for sure because it's a significant amount of money. So I would say, if I had to handicap it, maybe 10% of the customers we see in that marketplace would have been starting to apply. But I think in general, people really want to see how things are going to shake out, and we're starting to see that now.

Okay. And then my other question is, can you elaborate on the size at all of that military contract and when you might start like actually shipping to that customer?

Well, in terms of the size, I think the most -- first of all, I mean, I would have to say that it's a highly sensitive contract. I think in terms of the size, probably the most I could say right now, John, is that it's material to our business. It's not like a smaller portion of our business. So it would be a material contract for the company. We're hoping to be shipping in volume in Q2 next year. So just to clarify that point, I mean, we are getting -- I mean, again, on the whole military discussion, I think a lot of the 28 evaluation kits that we shipped out are to military people, particularly a lot of it is drones. And I think as everyone knows, in the Ukraine war in the Middle East, drones are playing a very significant role. And so the whole concept of Stealth high-speed communications is a big part of that value proposition we bring to the party. But generally, I think one of the knocks against militaries, it takes long. But I think what we have to keep in mind for our business is that there are ongoing wars that people want solutions now. So we expect to be shipping in volume right now if all goes well, and it is going well by Q2 next year.

Okay. Thanks.

My pleasure.

Thank you. I show there are no further questions in queue at this time. That will conclude today's conference call. Thank you for your participation. You may now disconnect.

Thank you.